Malaysia’s Bond Yield Touches Three-Month High on Fed Concern

The yield on Malaysia’s five-year government bonds rose to an almost three-month high after U.S. Treasuries fell on speculation the Federal Reserve will reduce asset purchases. The ringgit climbed.

The rate on 10-year Treasuries climbed one basis point today and 45 basis points in May to 2.12 percent, set for the biggest monthly jump since December 2010, data compiled by Bloomberg show. Fed Chairman Ben S. Bernanke said last week the central bank may scale back monthly debt-buying if the economy showed signs of sustained recovery. Malaysia’s governing coalition won a May 5 election to extend its 55-year rule.

“The market’s move is in reaction to the knee-jerk selling in U.S. Treasuries,” said Ray Choy, regional head of fixed-income research in Kuala Lumpur at RHB Research Institute Sdn., a unit of RHB Capital Bhd. “Some of the catalysts for buying government bonds have been removed as the political uncertainty eased after the election.”

The yield on the 3.26 percent notes due March 2018 rose one basis point, or 0.01 percentage point, to 3.28 percent as of 4:20 p.m. in Kuala Lumpur. It touched 3.30, the highest level since the debt was sold on March 5, according to data compiled by Bloomberg. The rate rose 13 basis points this month.

The ringgit advanced 0.3 percent to 3.0705 per dollar, after sliding 1.2 percent yesterday, according to data compiled by Bloomberg. The currency fell 0.9 percent in May. One-month implied volatility, a measure of expected moves in exchange rates used to price options, climbed 11 basis points to 7.49 percent. The rate has fallen 92 basis points since April 30.

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